If you could have sat in on the many, many talks and discussions that we have had in Cabinets, and meetings of the National Security Council, where the domestic and fiscal point of view had been very ably represented by the Secretary of the Treasury, Mr. Humphrey, and the Budget Director, Mr. Dodge, you would see that every item in here has been gone over very thoroughly.

While it is not possible to say with absolute certainty that every dollar is required because events may alter the requirements, nevertheless I think you can be satisfied that we have used the very best judgment we could to cut this down to the limit which we consider to be the national safety.

Chairman CHIPERFIELD. Mrs. Bolton

Mrs. BOLTON. Thank you, Mr. Chairman.

Mr. Secretary, we are always glad to have you before us and we appreciate this opportunity before you go off on your trip to the Near East, India, and Pakistan, as you are doing.

We are glad to see that you feel a need to see for yourself the men in authority in those areas. Certainly, the Near East cannot be separated from the rest of the world problem in any way. Anything we can do to further the well-being of those areas, and to bring them into closer touch with us is well worth doing.

I do not have very much to question you about today because as the bill is set up, the various questions we may have relative to the Near East will need detailed information. I hope that whoever comes before the committee for this questioning will be very well prepared to give us the breakdowns and the important knowledge we must have in order to deal intelligently with the problems we must face in our study of the bill.

Secretary DULLES. I shall certainly do so, Mrs. Bolton.
Chairman CHIPERFIELD. Mr. Battle-

Mr. BATTLE. Thank you, Mr. Chairman.

In the past few years it has pretty much been our policy to move from one crisis to another, to try through legislation to help Europeans and our friends elsewhere to get on their feet, so that they can walk off on their own, and so that they can defend themselves.

We were under the impression that we were going to work out from under this tremendous foreign-aid program and the terrific load that we have been carrying.

As I understand it, we now have a change in the policy which anticipates planning over a 10- to 20-year period.

I was wondering if that is correct and if it is, how far have we gone in commiting ourselves to this new policy in NATO, and with our other friends?

Secretary DULLES. The only commitment made, and that was made subject to congressional action, was the 3-year commitment about infrastructure to which Congress Vorys addressed himself. There is no 10-year plan or 5-year plan.

What we have tried to do, particularly in relation to NATO, where that has been carefully studied, is to get the effort on to a level where we believe it can be sustained for what may be a fairly long period. The type of effort that was being made was a type of effort which had brought the European countries and perhaps even ourselves, very close to a point of economic and financial exhaustion and we were told

by them very frankly, that they could not sustain that type of effort without largely increased help from the United States.

We believe, and this belief is nothing new, it is a belief which President Eisenhower when he was General Eisenhower, in command of NATO forces, frequently expressed: We believe that it is not possible to predict with sufficient certainty any particular year of maximum danger so that we are justified in making an economically exhausting effort to obtain maximum strength in that particular year, if the consequence of making that effort is that our ability to maintain strength during the next year and the year after that, and the year after that, will be impaired.

I have often used the example of a person running a race who is told at the beginning of the race that it is a 100 yard race and when he gets to the tape of 100 yards, he is told, "Well, I am sorry, but now you have to run for a quarter mile."

Then he just barely makes the quarter mile, and then he is told, "There is a mile race," and then he falls exhausted.

We do not want that to happen. That is the thinking that there was a danger of happening.

It is always difficult to turn these things around. They cannot be turned around instantly and it is necessary to avoid a shock; it is also necessary to avoid a disintegration of effort.

There was great danger that our effort would be interpreted as indicating that we felt that there was no longer a really serious danger from Russia, and that the result would be that the governments of NATO would say, "Well, if that's the case, we might as well quit the whole business."

Of course, we do not think that the danger from Russia has diminished at all. On the contrary, our view is that it is a continuing danger and we must operate to meet it on that basis.

So that we changed the approach, the perspective, and nature of the effort in a way which I believe, makes the NATO structure much more sound than it has ever been before.

However, it would not be correct to say that we have adopted a 5year or 10-year plan or made any commitments for 5 or 10 years. We did not do so.

We changed the type of effort to a kind which we think will be within the economic capabilities of the governments to sustain for a considerable period of time.

Mr. BATTLE. You see no possibility of our working out from under this foreign-assistance load in the next few years?

Secretary DULLES. I see the possibility and indeed the probability of a considerable reduction in the contribution that we are going to have to make.

Now, there is already a reduction coming which is fairly substantial in terms of what has been called straight economic aid. That is being cut rather substantially and the doctrine which we preached to our friends over there was that from now on, subject to a brief transition period which is reflected here-from now on, we do not believe that we should have to sustain the economies and the budgets of these countries by these outright grants of aid, and that we would limit what we did to specific things which we could earmark and identify and show to the Congress and the American people as being justifiably in the interest of the United States.

Now, as the new development of the offshore procurement and efforts of that sort build up airplane industries and ammunition plants and things of that sort in Europe, then more and more we will be able to cut down, in my opinion, what we have to contribute from this country in terms of such items, such independent items, airplanes and so forth.

A number of contracts have been placed and are being placed, which I think, will move Europe steadily toward being a more self-contained and self-sustaining force in these matters.

These things do not happen overnight.
Chairman CHIPERFIELD. Mr. Smith-

Mr. SMITH. Mr. Dulles, as we approach these problems each year, we are told that this is a critical year.

Now, notwithstanding the billions of dollars that we have spent around the world and especially in Europe, is it not acknowledged that the great problem in Europe today is still the dollar shortage, and is there not the same dollar problem and the dollar gap as it existed when the Marshall plan started 5 years ago?

Secretary DULLES. There is still, today, a gap of about $3 billion between the exports and imports of the United States.

I do not recall how that breaks down in terms of Europe, but substantially it is in our relations with Europe.

Mr. SMITH. Notwithstanding the great increase in productivity, we still have certain basic problems that affect the whole economy in Europe, today, such as convertibility and so forth?

I am just wondering how does this program as now suggested in the bill before us overcome those problems?

Secretary DULLES. I do not think that it does, Congressman. I believe, myself, that the only fundamental solution to the problem, as far as Europe is concerned, lies in greater economic, military and monetary unity of Europe. That is where a solution can be found and I do not myself see any solution short of that.

Now you may say, "Why will that be a solution?"

It will be a solution because in my opinion the produce of the different countries of Europe, which constitutes in various countries a surplus for that particular country, will be more freely exchanged with the other countries.

Just as in the United States, the surplus of one state is exchanged with the surplus of another state.

If you have greater monetary stability, money, then, will inceasingly play its role of promoting trade.

Today, there is an abnormal demand for dollars because dollars represent the currency which most of all has extensive purchasing power and sustained values.

Therefore, all over the world, people want to get dollars.

If they had a good, sound currency of their own which was stable, dependable, and which represented sustained buying power over a large variety of goods, then I think that a large part of the so-called dollar gap would automatically disappear.

That, in my opinion, is the fundamental way to solve the problem. You are quite right-if I am right-in saying that this particular program does not in and of itself solve it.

Mr. SMITH. Now then, is not the basic question or problem a political one, and for each particular country as such-I do not believe it is our

foreign policy to interfere or influence the political situations that exist in these various countries. At least it should not be. Yet local problems must be solved by local governments, not the United States.

Now we have a situation that is rather a difficult one in France. We have a difficult political situation in Italy, and I think there is a difficult political situation in Germany.

The point I am trying to make is, Is there not something that we as a people can do for other people, and not their governments? This matter of convertibility and this matter of our own economic situation rests primarily with them, and until they come up with some plan of their own, there is not much we can do as I see it.

Now, do you agree with that?

Secretary DULLES. Yes.

I would say in qualification that they have come up with a plan. You already have in existence the so-called Coal and Steel Community the so-called Schuman plan, which is coming into operation.

It created a single market in steel, on the 1st of May. That is the international or supranational, if you want to call it that, body, which is, I believe, a very important step in the direction in which we are thinking.

There is active consideration being given to a more broad, vertical union of Europe, and there is this EDC project, which originated in Europe, where the treaties have been signed by all of the governments, but parliamentary ratifications are still awaited.

I do believe that the leaders of Europe are alert to the dangers that you point out. I believe that the solution is in their own hands.

I believe that if this present program should collapse, it would require a very considerable reconsideration of our own policy there. I do believe that we are justified in the light of all that I know, in giving them a respite, so to speak, or a further opportunity to accomplish what I am convinced the leaders of Europe all want to accomplish and which I hope is on the eve of fulfillment.

I hoped that we could come before you by this date and say, "Well, this great step has been taken." Well that hope has been deferred. I do not think the deferment is of such a drastic character that it should mean that we are hopeless.

I myself still have considerable hope that within the next three or four months this thing will be realized.

Mr. SMITH. I think you have been extremely fair, Mr. Secretary, in your approach to that problem.

I think you have a rest period until July, now?

Secretary DULLES. I have attempted to fix no date. I have been accused of laying down an ultimatum on this subject, but I never have done that.

Mr. SMITH. Do you think that if some kind of an ultimatum was given to them, and they saw that they were right up to the gun, that some of these things would happen?

Secretary DULLES. I will remind you that at the present time you are dealing, not with governments, but with parliaments, and you yourselves can judge better than I whether parliaments are best influenced by that type of action.

Mr. SMITH. Yes, and parliaments represent people as does the Congress. That is all. Thank you, Mr. Chairman.

Chairman CHIPERFIELD. Mr. Carnahan——

Mr. CARNAHAN. Mr. Secretary, it is good to see you again and hear your answers with respect to this particular program.

I too want to express my appreciation for your well thought through and balanced program which you and your associates presented to us yesterday.

In your basic principles in your statement yesterday, I would like to read again, in order to emphasize, two of them, which I think naturally go together. [Reading:]

First, our country is confronted by a very grave threat. There is not yet any evidence that this threat has diminished, or will diminish within the forseeable future.

And then your fifth point:

Our mutual security planning must be, and is, long-range. We cannot afford to exhaust ourselves by spasmodic programs designed to meet ever-recurring emergencies. We cannot operate on a day-to-day, hand-to-mouth basis. Instead, we must think in terms of policies and programs that we can afford to live with for what may be a long period of years.

sir.

I would like to add this comment and then I have two questions,

With the agreement between the former administration and the present administration regarding our foreign policy and our foreign aid program as shown by these and other statements, our people should be brought squarely face to face with the realities of the threat to the free world.

Now, this question you have answered before, but I would like to put it anyway.

Do you feel that the $5.8 billion figure presented is the low figure consistent with free world safety and with our own best interests? Secretary DULLES. Yes, sir.

Mr. CARNAHAN. Are you prepared to give to the committee the total spending figure for the fiscal year 1954?

Of course we are appropriating an amount of money in this authorization and appropriation, but we all understand, and you have said, that the money will not be spent in the current year, but will be spent in the next few years. You do not need to give this figure at the present time.

If you will prepare this statement and give it to the committee Secretary DULLES. I would prefer to have Mr. Stassen answer that question.

Mr. CARNAHAN. That will be all right.

Secretary DULLES. He has closer track than I have of the rate of expenditure. You have this stuff flowing out through the pipeline, so to speak, and it is quite complicated to know when it is coming through and will have to be paid for.

Mr. CARNAHAN. I did not intend for you to answer it this morning. I just wanted to know if you were prepared to present the figure. Secretary DULLES. We are so prepared.

Mr. CARNAHAN. That is all.

Chairman CHIPERFIELD. Mr. Merrow

Mr. MERROW. Mr. Secretary, we are glad to have you with us again, and I want to compliment you on the fine statement that you made to the committees yesterday.

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